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India's ambition of becoming a $5-trillion economy rests mainly on the shoulders of recent government policies, especially high capex spending plans, Production Linked Incentive (PLI) scheme and the National Monetisation Pipeline (NMP).
"The capex spending is set to pick up momentum as Budget 2022 proposes to spend 35% more on capex in the next financial year. The PLI scheme could boost GDP growth by 0.3-0.5% between 2023-2027. The NMP will ease fiscal burden for the government towards infrastructure financing," as per Ravi Gopalakrishnan, CIO-Equity, Sundaram MF.
"The PLI scheme could be the joker in the pack. We are already attracting massive amounts of funds due to the scheme. This showcases the fact that the next decade could belong to India," Gopalakrishnan said at the Cafemutual Ideas Fest 2022.
What more should India do?
According to Gopalakrishnan, India should adopt the China model to boost growth. "China registered double digit growth in the 80s and 90s on the back of low interest rates. India should also try to keep interests low as high rates can dissuade companies from capacity expansion," he said.
Earnings go up but margins decline
For Indian companies, earnings have gained momentum but rising input costs have led to a continued margin pressure. However, commodity prices are now seeing some pullback, bringing relief for corporates, Gopalakrishnan said.
"If prices correct further and demand starts to improve then the overall numbers will look extremely good. This is why companies are shifting to the demand side," he added.
